No wonder saving money is a top New Year’s objective for most Americans, given the inflationary hellscape of 2022. As the price of necessities like gasoline, transportation, groceries, and housing has increased, Americans have seen their purchasing power decrease.
Despite the Fed’s best efforts, inflation has been rising steadily throughout 2022, reaching a high in the summer before gradually falling during the rest of the year. Concerned about the impact of inflation and a probable recession on their finances, most people are prioritizing saving in 2023.
Sticking to your resolution is difficult, but that’s true of any change you make. Here are some strategies for thriving in the year 2023, when predicted increases in inflation will continue being felt by most people.
1. Negotiate lower prices on everyday bills and necessities
There is always room for bargaining after unwinding to slots on PlayCroco Casino (unwinding is especially important in times like this) to offset price increases. Create connections with your providers first, and then inquire about special offers and discounts. Putting in the request won’t hurt anyone.
You can negotiate the annual percentage rate (APR) on your credit card and the fees associated with your streaming service, insurance premiums, cable bill, cell phone plan, and gym membership. According to research, customers who call in and request a reduced rate nearly always receive it, making this a helpful strategy for lowering monthly spending. If the lender or seller is not ready to negotiate, look elsewhere.
The dealership could offer free oil changes for a year with the purchase of a new or used vehicle. Can you get a room with a nicer view if it’s a hotel? It’s not always the best strategy to consider sales prices. It is preferable to get more for the same amount of money to increase value while maintaining the same cost.
2. Repay any existing variable debt
Debt repayment is a low priority for many people, with payments being made from whatever funds are left over at the end of the month. Debt repayment, notably credit card, line of credit, personal loan, and variable rate mortgage repayment, are now a distant second to living costs and well ahead of investment. If you have a credit card with an interest rate of, say, 16% or 18%, you’re not going to beat that with any investment.
3. Make a new or revised budget plan
Sticking to a budget is a tried and true method of combating inflation. This will help you keep a close eye on your finances and avoid overspending, no matter how much gas prices rise due to inflation. It will also aid in prioritizing where your money should go. Consider how inflation could affect your spending on necessities like food, clothing, and shelter, and plan accordingly. You should budget for the month at the start of the month and then keep to that budget.
Avoid tapping into savings for emergencies or retirement, but allow for some spending flexibility by shifting money around in the budget. A family’s financial security should always include a cushion for emergencies. Put a cap on your spending in areas where inflation could have an impact, like apparel, groceries, and shelter.
Ideally, twenty-five to thirty percent of your income should go to savings. Protecting one’s family from unexpectedly high costs requires maintaining a six-month salary’s worth of savings in an emergency fund.
4. Be prepared for the unexpected by setting aside an emergency fund
It’s tempting to try to find investments that will grow at a rate faster than inflation when prices are rising rapidly. However, before thinking about where to invest, you should have enough cash to handle any pressing financial issues, as recommended by financial experts.
Less than half of Americans have less than $1,000 saved for a rainy day. Paying off debt is priority number one while building an emergency fund should come second.
The amount of interest these funds can earn is negligible. Since the purpose of an emergency fund is to be accessible in the event of an unexpected expense, it is prudent to keep the money set aside for such a contingency in a high-yield savings account, even when doing so means effectively losing money to inflation.
5. Prioritize spending
Even if you’re already buying products at a discount, you may need to cut some expenses to make room for the things you really need. Consider cutting back on “nice-to-haves” rather than “must-haves,” such as entertainment and dining out. You can forego your gym membership if your building has a gym where you can get your workout in. You can go longer than usual in between haircuts. Take the subway a couple of times a week or organize a carpool to save money on gas.
If you’re interested in a product or service and have the means to pay for it, you should probably buy it as soon as possible.
6. Diversify your investments
Determine the appropriate assets as investment options to preserve your purchasing power in light of your income, expenses, risk tolerance, and time horizon. Treasuries lose purchasing power if inflation rates are higher than the interest you earn from them. But other alternatives make up for that.
Investing in stocks, real estate, and Treasury inflation-protected securities (TIPS) as part of a well-balanced portfolio will generate sufficient returns over extended time frames to keep up with inflation.
Rather than try to time the market, stick with diversity and readjust your target portfolio at least once a year.
The bottom line
Well, there you have it! Hopefully, you’ll be encouraged to focus on areas of your budget you can change to better your financial situation and mitigate inflation.
